Like in most states, Oklahoma’s Affordable Care Act (ACA) insurance exchange is on the brink of collapse. Individuals unlucky enough to seek insurance on the state’s marketplace face increasing premiums and a declining number of insurers willing to provide coverage. Since 2015, average monthly premiums in the exchange have increased from $277 to $571. Participation is also low; only 31 percent of subsidy-eligible individuals for the last full plan year purchased plans in the exchange.
Several insurers have pulled out of the state exchange in recent years due to the high cost of providing coverage, and now only one remains: Blue Cross Blue Shield of Oklahoma, which effectively has a statewide monopoly.
To address these growing issues, the Oklahoma Legislature passed a bill in 2016 calling for the state to explore possible solutions under the 1332 State Innovation Waiver process. Section 1332 of the Affordable Care Act allows states that meet several conditions to waive certain key provisions of the ACA. To obtain a Section 1332 waiver, a governor must gain approval from the state legislature and then from the U.S. Department of Health and Human Services (HHS).
Following the passage of the waiver bill, Oklahoma Gov. Mary Fallin (R) established the 1332 State Innovation Waiver Task Force (Task Force) to bring together interested parties to develop potential strategies to improve the state’s failing Obamacare system. The state’s plan is incremental, using several 1332 waivers to enact substantive reform.
The first step of the plan would establish a reinsurance program and has already been submitted in a 1332 waiver to HHS. It also asks for a pass-through of the savings the federal government would receive from decreased premium tax credit costs to use for the new reinsurance program. The new program would reinsure 80 percent of single-year claims between $15,000 and $400,000. The waiver proposal estimates the program could reduce premiums by 34 percent by 2018 and increase enrollment by 28,000 by the third year of the program.
In addition to the federal funds, a fee – about $5 per month, or $60 per head per year – paid by Oklahomans who have health insurance through employers or self-funded plans would fund the reinsurance program. Medicare and Medicaid recipients would not be required to pay the fee. A Task Force “Concept Paper” estimates the new waiver would increase the number of exchange applicants by between 5,000 and 15,000, and premiums could drop by more than one-third.
This waiver is only the first in a larger group of reforms. In the 1332 Task Force’s Concept Paper, state legislators outline a series of planned solutions that will be incorporated into future waiver requests, including:
- Require a focus on health outcomes and cost containment by implementing state quality measures and promoting value-based payments and care coordination within health plans
- Change the way insurance products are priced by broadening age ratios that limit the differences in age-based pricing
- Reduce administrative burden on plans related to reporting, risk mitigation, eligibility, and enrollment
- Eliminate the use of the Federally Facilitated Marketplace (FFM) and instead utilize the Insure Oklahoma platform to determine eligibility for coverage and calculate subsidies
- Establish consumer health accounts similar to health savings accounts (HSAs) to encourage consumer-directed care and implement consumer incentives
- Change subsidy eligibility to individuals with incomes between 0% and 300% of the Federal Poverty Level (FPL)
- Standardize subsidies based on age and income
- Simplify plans by eliminating metal tiers and providing easy-to-understand choices
- Modify core benefits so the State can be innovative and flexible in order to reduce costs while providing adequate coverage
- Change rules for special enrollment requests, premium payment grace periods, and exemptions to promote timely enrollment and streamline enrollment processes
A governor can only request a Section 1332 waiver that has been authorized by his or her state legislature. States must engage in a transparent public process when requesting a waiver, including publicizing requests on state websites, holding hearings, and collecting comments. Additionally, the waiver cannot be projected to increase the federal deficit.
Oklahoma’s most recent waiver request, if approved, will be an important first step toward managing the rising costs created by the ACA. The state should continue to follow the Task Force’s plan to implement the state’s ambitious reforms, which would give Oklahoma the flexibility it needs to address the problems created by the ACA.
HHS and the Trump administration have called on lawmakers to submit waivers and push for ACA reform in their states. Other states should not wait until their health care markets are on the verge of collapse before they submit waivers to take back control of their health care markets from the federal government.
The following documents examine Medicaid reform and the waiver process in greater detail.
Research & Commentary: Iowa’s 1332 Waiver Could Be a Bellwether for Other States
https://heartland.org/publications-resources/publications/research–commentary-iowas-1332-waiver-could-be-a-bellwether-for-other-states
In this Research & Commentary, Senior Policy Analyst Matthew Glans examines a 1332 Affordable Care Act waiver from Iowa that asks the Department of Health and Human Services to allow the state to use estimated federal spending from ACA tax credits on new state tax-credit and reinsurance programs. “Iowa’s waiver proposal is far from perfect. However, it does illustrate well the desperate situations that have been created by the ACA in many states and the ability of the waiver process to address these problems by giving states the flexibility to change their health care system,” Glans wrote.
A New Horizon: Recommendations for Oklahoma’s Modernized Health Insurance Market
https://www.ok.gov/health/documents/1332%20Waiver%20Concept%20Paper.pdf
This paper produced by the 1332 Waiver Task Force outlines the task force’s proposed reforms to the state’s health insurance marketplace and provides a time line for submitting State Innovation Waivers to implement the policy changes.
1332 State Innovation Waiver Application for the State of Oklahoma
https://www.ok.gov/health2/documents/1332%20State%20Innovation%20Waiver%20Final.pdf
This is the waiver submitted by Oklahoma to the U.S. Department of Health and Human Services requesting permission to establish a reinsurance program.
Iowa Submits Sweeping 1332 Waiver Seeking Emergency Relief
https://www.manatt.com/Insights/Newsletters/Manatt-on-1332/Iowa-Submits-Sweeping-1332-Waiver-Seeking-Emergenc
Joel S. Ario, Chiquita Brooks-LaSure, and Adam M. Finkelstein of Manatt, Phelps, and Phillips examine the current details of Iowa’s Stopgap Measure 1332 waiver and the changes it proposes.
Innovation Waivers: State Options and Legislation Related to the ACA Health Law
http://www.ncsl.org/research/health/state-roles-using-1332-health-waivers.aspx
The National Conference of State Legislatures examines the Section 1332 waiver process and outlines how states can use the waiver to reform the Affordable Care Act within their states.
States Watch Iowa’s Push to Reshape Health Law
https://www.wsj.com/articles/iowa-seeks-ambitious-waiver-to-reshape-health-law-within-its-borders-1503482400
Anna Wilde Mathews, Michelle Hackman, and Stephanie Armour of The Wall Street Journal examine Iowa’s proposed 1332 waiver and other states’ close monitoring of its progress. “Other states say they are considering similarly broad waiver requests for the future. Ohio is eyeing a proposal that would pare back a central [Affordable Care Act] requirement that most people purchase health insurance or pay a penalty. Oklahoma, which has submitted a limited request to set up a reinsurance program, is crafting a broader proposal that would, among other changes, reduce the number of health benefits that insurance plans must cover,” the authors wrote.
How States Are Addressing Uncertainty with 1332 Waivers
http://healthaffairs.org/blog/2017/06/09/how-states-are-addressing-uncertainty-with-1332-waivers/
Writing for the Health Affairs Blog, Heather Howard and Dan Meuse discuss how several states are using 1332 waivers to address the issue of stability in their individual health insurance markets.
The ACA’s Section 1332 Waivers: Will We See More State Innovation in Health Care Reform?
https://www.nihcm.org/categories/the-aca-s-section-1332-waivers-will-we-see-more-state-innovation-in-health-care-reform
In this article for the NIHCM Foundation, Joel Ario, managing director of Manatt Health, argues 1332 waivers offer states an important opportunity to customize their health care systems. Ario argues although the Obama administration slowed these reforms, the current administration could change course.
Section 1332 State Innovation Waivers: Current Status and Potential Changes
http://www.kff.org/health-reform/issue-brief/section-1332-state-innovation-waivers-current-status-and-potential-changes/
This Issue Brief from the Kaiser Family Foundation provides an overview of what Section 1332 Medicaid waivers are, how they are approved and financed, how states have used them, and how they have impacted health care reform.
State ACA Waivers: A Bipartisan Solution
http://www.aei.org/publication/state-aca-waivers-a-bipartisan-solution/
Joel M. Zinberg of the American Enterprise Institute discusses how state Affordable Care Act (ACA) waivers could be used by the states to enact reforms in a way that has bipartisan approval. “State Innovation Waivers are one of the few ACA policies with bipartisan support. They give states considerable flexibility in deciding how to achieve the ACA’s goals of expanding access to affordable care within their borders. Allowing states to experiment with different approaches will create a natural laboratory in which to assess what works and what does not,” wrote Zinberg.
Wyden’s Waiver: State Innovation on Steroids
http://jhppl.dukejournals.org/content/early/2014/05/09/03616878-2744824.short
John E. McDonough writes in the Journal of Health Politics, Policy, and Law about 1332 waivers and their potential to institute a wide array of state-based health-sector innovations, which he argues could come from both ends of the political spectrum.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
